7 tips to save successfully for your child’s education, even during the tough times

In this environment, saving can seem like a luxury to many people.Picture Ayanda Ndamane / Independent Newspapers.

In this environment, saving can seem like a luxury to many people.Picture Ayanda Ndamane / Independent Newspapers.

Published Feb 15, 2024


By: Tracy Muller

The current challenging economic climate has many household budgets stretched thin. In this environment, saving can seem like a luxury to many people and, often, the savings or investment plan is the first thing that gets trimmed or cut from the budget when families face financial challenges.

While this is understandable, saving for a child’s education should never be compromised. In fact, periods of economic uncertainty should catalyse us as parents or guardians to put even more effort into securing our children’s future by staying on track to give them the best education we can and pave the way for the life they deserve.

Useful tips on how to save successfully for your child's education, ensuring that despite tough times, you're investing in their limitless potential.

1. Start saving early – The power of compound interest – or repeatedly earning interest on your interest – should not be underestimated. Thanks to compound interest, even a modest regular contribution to a savings account can grow into a significant educational fund over time, and starting early and staying the course can mean the difference between a comfortable educational nest egg and a last-minute scramble for funds to pay for schooling or university.

2. Speak to the experts – There is a reason why we have experts in various fields such as multimanager who utilise their expertise to select appropriate funds from the cover 1500 registered funds in South Africa. It is equally important to select an appropriate product that meets your objectives and goals such as tax-free savings accounts and education plans. Selecting an appropriate strategy fund managed by a multimanager is the best way to achieve a diversified approach and to lessen the risk of volatility on your education savings plan during future economic fluctuations.

3. Set clear goals – Having a clear idea of what you want to achieve is widely recognised as one of the keys to successfully achieving it, and that’s especially true of any savings plan, including education. Knowing the future cost of your child’s education (and keeping track on escalations) is crucial to successfully saving up the funds to pay for it. By calculating these costs, you can set realistic saving targets and ensure that you don’t encounter any shortfalls when the time comes to pay school or tuition fees down the line. And remember to factor in the ‘hidden’ costs, like textbooks, stationery, allowances, transport and accommodation.

4. Automate your savings – A 'set it and forget it' approach to saving ensures you're consistently contributing to your child's future. Most banking apps allow you to set up automatic transfers to an education savings account, which means there’s no chance of derailing the savings plan by forgetting to transfer money for a month or two.

5. Review and adjust, regularly – Life's only constant is change, and your education savings strategy should reflect this truth. It’s unlikely that your life or circumstances will stay the same over the 10 or 20 years of your education savings plan, and just as it’s good practice to review your financial plan at least once a year, it’s advisable to revisit your education savings plan and check that the goals are still appropriate and that you’re on track to achieve them.

6. Make it a community effort – There’s a saying that "it takes a village to raise a child," and this is especially true when it comes to giving that child a good education. Family members and friends want the best for your child too, and many of them may be willing to contribute towards the education savings plan to make sure they have the best future they can. Sometimes, all that’s required to bring them in as valuable education savings partners is to tell them that they have the opportunity to contribute.

7. Teach your child about education savings - Involving your child in the saving process as early as possible is a valuable educational journey in itself. Helping them to understand that it’s necessary to save up for their education and, even, giving them the opportunity to contribute to their own future, not only teaches them the value of money, but maximises their potential to succeed in their education goals. When a young person is financially invested in their education, the likelihood of them failing to achieve that degree or diploma is significantly reduced, after all, nobody wants to pay for something that they don’t get.

Like any good life plan, the keys to education savings success are planning and consistency, even during difficult times, and possibly the most powerful incentive to stay the course when budgets are stretched is to remember the reason why you’re saving in the first place – to give your child the opportunities he or she deserves to transform the future.

* Muller is the head of advice and philanthropy at Nedbank Wealth.